Topics
How Much Are Average Monthly Mortgage Payments?
Most residential mortgages are repayment mortgages, with an interest-only mortgage more common for rental properties. For that reason, this article will focus on the monthly repayment values of a repayment mortgage.
The most up-to-date information on the average monthly mortgage payment in the UK comes from 2022, thanks to a survey by Lloyds Banking Group.
Lloyds Banking Group reported that the average monthly mortgage payment was £759, which is up 2% from the previous year. Over the past 10 years, mortgage payments have increased by 31%. However, the Office for National Statistics found that mortgages for semi-detached houses increased by 61% in December 2022, compared to December 2021.
This may seem like a lot of money, but the same survey found that monthly rental fees averaged £874, a 6% year-on-year increase. This means that in many parts of the UK, it is more affordable to repay your mortgage as a monthly expenditure when compared to renting.
Regional differences
The average mortgage payment varies across different regions. Typically, London and the southeast have high payments compared to the north.
Below are estimated average mortgage payments for different parts of the UK:
- London: £1,355
- South East: £1,025
- South West: £804
- East Anglia: £758
- West Midlands: £660
- East Midlands: £654
- North West: £617
- Wales: £596
- Yorkshire and Humber: £561
- Scotland: £548
- North England: £494
- Northern Ireland: £476
How Much Are Average Interest Rates?
There are rarely set average mortgage interest rates, as individual lenders and different mortgage deals will offer different interest rates.
Although we can’t provide you with exact interest rates, we can provide averages for the most popular mortgage deals using the interest rates and loan-to-value (LTV) rates.
A 75% LTV means you paid a 25% deposit and are borrowing 75% of the property’s value.
The data below is sourced from the Building Societies Association and shows the mortgage interest rates as of August 2023:
- 2-year fixed rate, 95% LTV: 6.92%
- 2-year fixed rate, 75% LTV: 6.21%
- 3-year fixed rate, 75% LTV: 6.02%
- Standard Variable Rate: 7.85%
Mortgage lenders don’t always offer these average mortgage interest rates as they will assess:
- Credit reports
- Property value
- Construction considerations
- Employment status
- Existing debts
- Salary/Income
- Deposit
- Mortgage term
What’s The Average Mortgage Term?
The average monthly mortgage term is much longer than the terms for personal loans. And the more extended the term, the more time you will have to pay back the mortgage loan. Your payments may be less month-to-month, but with longer terms, you will end up paying more overall.
The average mortgage term in the UK is typically 25 years. However, extended mortgage terms of up to 40 years have become more common.
There are also much shorter mortgage terms available – as short as six months in some cases. However, the shorter the term, the higher the average mortgage repayment. The plus side of this option is that the average mortgage cost will be less, as you will pay less interest over the reduced time period.
Since 2020, the average UK house price has skyrocketed. Although the real estate market seems to be settling a bit, these higher prices meant buyers were looking for longer terms to reduce the monthly mortgage repayment.
How To Reduce Your Monthly Mortgage Payments
One of the easiest ways to reduce your monthly payments, at least initially, is to opt for an interest-only mortgage. This type of mortgage allows you to pay only interest for the initial term. By the end of this initial interest-only term, you still need to repay the full mortgage amount. However, it does initially relieve the burden of a monthly mortgage repayment plus interest.
Interest-only mortgages are also more expensive at the end of the term due to the interest payments and final balance.
Here are some other ways in which you can reduce your monthly payments:
- Large deposit: A large initial deposit means your monthly mortgage repayments will be reduced, as the lender is dealing with less risk and a lower LTV.
- Extended term: An extended term means you will be repaying your mortgage for longer, but your monthly mortgage payments will be reduced.
- Overpaying: Some lenders offer a bit of flexibility with repayments. When you are in a good financial situation for one month, you may be able to pay more than your usual monthly payments, and then pay less the following months.
FAQs
What is the average house price in the UK?
The average price of a house in the UK was estimated at £292,552 in November 2022. This has decreased slightly over the course of the year, with the Land Registry determining that UK home prices averaged £291,044 in August 2023. Prices may be dropping, but the average mortgage interest rate remains higher than in previous years.
What is the average mortgage debt in the UK?
In March 2023, the average outstanding mortgage debt was estimated at £127,420, with more than 13 million active mortgage accounts in the UK.
Wrapping Up
Mortgage payments vary greatly across the UK. These repayments depend on where you live, your financial circumstances, your deposit and your house’s value.
With an average monthly mortgage payment of £759 estimated in 2022, and house prices seeming to stabilise, buying still seems like a better option than renting.
It is crucial to understand the costs involved when getting a mortgage so you can be prepared for how much to keep aside each month.
Additional Sources:
https://www.bsa.org.uk/statistics/mortgages-housing
https://moneynerd.co.uk/average-mortgage-payment/
https://thinkplutus.com/mortgages/guides/average-mortgage-payment/
https://upthegains.co.uk/blog/average-monthly-mortgage-payment-in-the-uk
https://boonbrokers.co.uk/how-much-does-the-average-mortgage-cost/
https://www.finder.com/uk/mortgage-statistics
https://www.money.co.uk/mortgages/uk-mortgage-statistics-and-facts